July 14, 2023

Feds Issue Warning: Colleges Can’t Silence Whistleblowers

Feds Issue Warning: Colleges Can't Silence Whistleblowers

On Thursday, the U.S. Department of Education issued a bulletin to colleges, warning that, under federal law, they cannot prohibit employees — including ex-employees who have signed non-disclosure agreements (NDAs) — from talking with the Department about their schools’ handling of federal student aid. The Department’s office of Federal Student Aid (FSA) said it was issuing the Enforcement Bulletin because it has learned that some ex-employees “believe” they are barred from communicating with FSA because they signed NDAs with their former employers.

In fact, as the FSA bulletin points out, under federal regulations, in order to be eligible for federal aid, schools must sign an agreement that includes a duty to cooperate with Department investigations, including by providing reasonable access to employees. FSA reaffirmed in this week’s bulletin that any effort by a school to prohibit an employee or ex-employee from speaking to the Department about federal aid matters would violate those rules.

The provision in the Department of Education regulations protecting the rights of college whistleblowers echoes other federal regulations upholding whistleblower activities by employees of companies that contract with government.

Having spoken with hundreds of employees and former employees of for-profit and career colleges, I think the reason that many people in this industry believe that an NDA prohibits them from contacting FSA or other law enforcement agency is because their employer created that impression through improper warnings and improper provisions of NDAs themselves.

In its bulletin, FSA says it is “aware” that some college NDAs “may improperly create the appearance or perception that personnel are limited in their legal ability to communicate with the Department in violation of the institution’s responsibilities…” FSA gives as an example:

a provision stating that personnel are only able to communicate about the institution to report “possible violations of any law, rule or regulation to any governmental agency or entity charged with enforcement of any law, rule or regulation” or “other disclosures that are protected under whistleblower provisions of any law, rule or regulation.” Because the language appears to limit the scope of what may be disclosed, personnel may interpret that language to prohibit their communication more broadly with the Department–i.e., personnel would have to make a judgment that the communication was to report a violation or subject to whistleblower laws. By restricting personnel in that way, the language fails to explicitly permit communications of any kind with the Department about any subject associated with the administration of the Title IV programs. These types of provisions would not provide reasonable access to personnel required by 34 C.F.R. § 668.24(f).

In Thursday’s bulletin, FSA instructs that colleges must “ensure any NDAs make clear that personnel, including current and former employees, are legally able to communicate with the Department.”  FSA further warns that schools that fail to comply “could face administrative action.”

I suspect, based on extensive discussions I’ve had with former employees of Florida Career College (FCC), that FSA’s action this week is based in part on its investigation of that school, which the Department decided earlier this year to terminate from the federal aid program for egregious abuses.

Numerous FCC employees told me the school was particularly anxious to get departing employees to agree to restrictive NDAs, offering cash severance payments only to those who signed them. And after I reported in May 2020 on widespread bad practices at the school, the company’s general counsel issued a stern admonition — he called it “a friendly reminder” — to ex-employees to shut their mouths or risk being sued. Worse, while the actual NDA that FCC pressed departing employees to sign did at least say that nothing in it prevented an employee from reporting possible violations of the law to government agencies, the warning letter sent in May 2020 to ex-employees by FCC’s top lawyer didn’t mention those exceptions.

But Florida Career College is far from the only troubled for-profit or career college that has obsessed over getting employees to sign NDAs before they leave and that has misled employees about their rights as whistleblowers. I have reviewed problematic draft and signed NDA agreements from numerous schools, including, for example, a recent one from FCC’s Florida neighbor Keiser University that requires an ex-employee not to criticize the school but does not expressly advise that they would retain a legal right to raise federal aid issues with the Department of Education or other law enforcement.

College lawyers will now have to take a look at their NDA agreements to make sure they don’t violate the law.

This week’s bulletin also reaffirms FSA’s interest in receiving information from current and former employees, school contractors, third-party servicers and lead generators, students, or anyone else with information about potential violations of student aid rules, including about improper NDAs. People can share such information by visiting Ed.gov/FSATips or emailing [email protected].

FSA deserves credit for its intensified efforts to probe predatory college practices, and for notifications like the one this week that warn schools to obey the law or risk sanctions.  The agency needs more investigative resources, in a world where bad-behaving colleges are exposed and shuttered every week, yet scores more remain in business, wasting billions in taxpayer dollars and ruining the financial futures of hundreds of thousands of students across the country.